Con­necti­cut’s econ­omy qui­etly im­prov­ing

Stamford Advocate (Sunday) - - Front Page - DAN HAAR

There is no win­ning ar­gu­ment on the cam­paign trail that the Con­necti­cut econ­omy is good, or even OK. Re­pub­li­can Bob Stefanowski could win the gov­er­nor’s seat by bash­ing the state of the state’s pros­per­ity, and Ned La­mont, the Demo­crat, dis­agrees only on what to do about it, not on the woes.

We’ve heard all the neg­a­tive statis­tics, and they are not wrong. In 2017, we barely cre­ated any new jobs and the state econ­omy ac­tu­ally shrank by 0.2 per­cent af­ter ad­just­ing for in­fla­tion.

But qui­etly, Con­necti­cut has shown some signs of life. Just in time for the new gov­er­nor to take over, the state is poised to post some re­spectable num­bers be­tween now and the end of 2018 — in tax col­lec­tion, jobs, in­come, house prices and over­all growth.

No­body is say­ing happy days are here again, we’re gonna party like it’s 1987 and Colo­nial Realty is flip­ping build­ings like burg­ers. What we have, though, is the un­steady, un­cer­tain birth of a turn­around.

“We do have some good news that can be looked at even though we ranked 49th in terms of GDP growth last year,” said Don­ald Klep­per-Smith, of DataCore Part­ners in New Haven, who an­a­lyzes the econ­omy for Avan­grid and other clients.

Yes, of course there’s a caveat. This is Con­necti­cut, land of the debt over­hang and li­a­bil­i­ties that took decades to build up. And there’s a sharp dis­agree­ment about whether we need smarter in­vest­ment lead­ing to lower taxes or a prom­ise of lower taxes with no way to make that hap­pen.

Re­gard­less, the num­bers for how we’re do­ing right now are bet­ter than you think.

Rev­enue gains

We know we have a pro­jected sur­plus for the cur­rent fis­cal year to­tal­ing just un­der $170 mil­lion, but what does that mean? We’re also star­ing a $2 bil­lion short­fall in the face for fis­cal 2020, which starts next July 1, and more than $2.5 bil­lion for fis­cal 2021.

Early next month, right

af­ter the elec­tion, we’ll see those fu­ture short­falls shrink by a few hun­dred mil­lion dol­lars.

Here’s how: The sur­plus this year is largely be­cause tax col­lec­tions are up, and they’re up across the board ex­cept in cig­a­rette taxes. Cor­po­rate earn­ings, sales taxes, wage and salary with­hold­ing and quar­terly pay­ments from fi­nan­cial gains are all up mea­sur­ably.

That means that as soon as Nov. 9, per­haps a few days later, the gov­er­nor’s bud­get of­fice and the non­par­ti­san leg­isla­tive bud­get of­fice, along with the state comptroller, will spit out a new “con­sen­sus rev­enue” cal­cu­la­tion for fis­cal 2020 and be­yond.

Look for that rev­enue pro­jec­tion to rise by $300 mil­lion to $400 mil­lion, which means the short­fall shrinks ac­cord­ingly. Yes, I get that some of the gains we’re see­ing are from con­fus­ing new tax laws cre­at­ing ex­cess with­hold­ing, es­pe­cially for busi­ness part­ner­ships, which we will have to re­fund.

Still, much of the tax col­lec­tion in­crease is real.

Job bar­ri­ers

Jobs, the big kahuna of eco­nomics, are on pace to come close to the 1 per­cent thresh­old, or 17,000 for the year, if we fin­ish out the fall with de­cent gains. That’s a rough mea­sure of a good year, and since the re­ces­sion, we’ve never quite crossed that bar­rier.

We all talk about how our re­cov­ery lags other states. We’ve re­gained less than 90 per­cent of jibs lost in the re­ces­sion; the na­tion is at 225 per­cent and Mass­a­chu­setts is up 350 per­cent, more than four­fold — gospel num­bers that Klep­per-Smith re­cites like a fan nam­ing Su­per Bowl win­ners.

Im­por­tant stuff for the long view but what we feel now is what’s hap­pen­ing now and con­sider this: If the state Depart­ment of La­bor re­ports a de­cent month of gains for Septem­ber, in its monthly up­date due at the end of next week, we could break through three psy­cho­log­i­cal bar­ri­ers.

If we show a net gain of just 400 jobs, we’ll break back over 1.7 mil­lion for the first time since June 2008. If the tally is 1,800, we will show a gain of 20,000 jobs year-over-year. And if pri­vate-sec­tor job gains top 1,000 or so, we will have added 100,000 dur­ing Gov. Dan­nel P. Mal­loy’s eight years in of­fice.

The fact that 15,000 govern­ment jobs have dis­ap­peared dur­ing Mal­loy’s two terms is partly due to cut­backs at the Na­tive Amer­i­can casi­nos, which count as gov­ern­ments, and partly re­forms — in­clud­ing hefty cut­backs that Mal­loy had to make, well into the thou­sands of jobs. That’s been nec­es­sary for longterm growth but it has hurt the econ­omy dur­ing his years.

The 20,000 year-overyear fig­ure is not likely to hold up; Klep­per-Smith points out that we’re on pace for per­haps 7 or 8 tenths of 1 per­cent, in the 12,000 range. Even that would tally as im­prove­ment.

Psy­chol­ogy makes a dif­fer­ence. And when the big an­nual job re­vi­sions come in March, it’s worth re­mem­ber­ing that ini­tial data tends to un­der count on the way down, and un­der count on the way back up.

Bash­ing mat­ters

Go read any of the con­ser­va­tive Face­book pages and web­sites out there, bash­ing ev­ery sign of progress in Con­necti­cut. That’s hurt­ing the state and prod­ding more peo­ple to leave, which is, our big­gest prob­lem by a long­shot.

It’s not that I want to paint a falsely rosy pic­ture. It’s that some of that bash­ing — not all, but some — is just a dis­guise for antigov­ern­ment ide­ol­ogy, clas­sism and even racism when it comes to boost­ing cities.

I got into a ver­bal brawl on one of those sites last month — not a lib­eral troll, just keep­ing them hon­est — over the $15 mil­lion state Bond Com­mis­sion autho­riza­tion to de­mol­ish the Plea­sure Beach Bridge in Bridge­port, among other projects. A few peo­ple posted that such spend­ing only ex­tends the city’s de­pen­dance and ad­vances a “wel­fare state” for “ghetto rats” who live there. (“Getto rats,” one racist id­iot wrote.)

I’m em­bar­rassed to re­port those un­civ­i­lized slurs by two or three peo­ple who don’t rep­re­sent de­cent con­ser­va­tives, but they il­lus­trate a point. Of course we know the state’s cap­i­tal spend­ing on in­fra­struc­ture is to­tally un­re­lated to a city’s de­pen­dence on the state, and we know that cities are fail­ing not be­cause they’re mis­man­aged but be­cause of their bor­ders and shrink­ing tax bases due in large part to hous­ing pol­icy.

The point is that an­tiCon­necti­cut ar­gu­ments are built on a psy­chol­ogy of anger that feeds on, and ex­ag­ger­ates, poor growth num­bers. This state suf­fers from that syn­drome even in good times — worse in bad times.

A small turn­around in those num­bers may go a long way.

Grow­ing growth

On Nov. 14, right af­ter the rev­enue up­date, we’ll re­ceive a pre­lim­i­nary re­port on gross do­mes­tic prod­uct for the state, the over­all growth num­ber for the April-June quar­ter. We’ve swung and missed at the post-re­ces­sion re­cov­ery in over­all growth but guess what — for the last three re­ported quar­ters, we’re right on track with Pres­i­dent Don­ald Trump’s Amer­ica.

That’s more than a 2 per­cent an­nual rate, ad­justed for in­fla­tion. For all of 2018, Klep­per-Smith projects 1.5 per­cent to 2 per­cent growth, not bad for a state that has seen its econ­omy shrink even as the na­tion has re­cov­ered.

“One of the things where we’re start­ing to see some light at the end of the tun­nel is the wealth ef­fect,” Klep­per-Smith said. “Stocks are up and hous­ing prices are up.”

Hous­ing prices are up by 3 per­cent or even 4 per­cent this year, ob­vi­ously un­evenly, and the S&P 500 is up an­other 13 per­cent year-over-year. We’re house-rich and mar­ket­rich, es­pe­cially in Fair­field

County, and that boosts spend­ing by a per­cent­age of the pa­per gains — the wealth ef­fect — which helps growth.

Klep­per-Smith doesn’t see a dra­matic turn­around

any­time soon. And we can and do dis­agree on how Con­necti­cut should re­gain health. The good news is, bet­ter num­bers are upon us.

A na­tional re­ces­sion would throw all bets out the win­dow but at least then Con­necti­cut would not suf­fer as an oa­sis of dung in a sea of gold.

Hearst Con­necti­cut Me­dia file photo

Olivia Keator, 8, and her mother, Julie, en­joy a day of back-to-school shop­ping at the Con­necti­cut Post mall in Mil­ford.

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